Regulatory regime shapes aviation progress
KUALA LUMPUR: Amid intensifying competition among airlines, 2016 has been a progressive year for Malaysia’s aviation sector with respect to its regulatory and oversight regime.
This is especially so with the establishment of the Malaysian Aviation Commission (MAVCOM), an independent body set up under the Malaysian Aviation Commission Act 2015, to regulate economic and commercial matters relating to civil aviation.
The independent commission was tasked to look into areas such as the financial viability and capability of certain airlines to operate, which in the year saw the Air Service Licence of Rayani Air being revoked.
It also provided a platform for affected consumers to file their complaints and guide them on how to initiate a chargeback request, which saw 91 per cent of the 608 consumer complaints related to airlines and airports, being resolved todate.
Another major highlight announced this year was the revision of the Passenger Service Charges ( PSC) for airports in Malaysia whereby a new PSC tier for travels to domestic and Asean destination will be implemented.
Effective next year, passengers travelling from Kuala Lumpur International Airport (KLIA) and other airports nationwide to most international destinations would be charged RM73 in PSC compared with RM65 currently, and those flying to domestic destinations will only pay RM11.
Presently, passengers travelling to international and domestic destinations from klia2 are paying RM32 and RM6, respectively.
The PSC rate for those travelling from KLIA to Asean countries too will be lower at RM35 from the current RM65 but those flying from klia2 will pay RM35, slightly higher from the existing RM32.
Hence, 2017 will see to the steps towards equalising the PSC across all tiers at KLIA and klia2, to be completed by 2018.
“Equalisation of the PSC at KLIA and klia2 is important for the industry to create a level playing field for all airline carriers operating at both terminals.
“The new PSC rates coming into effect in 2017 remain among the most affordable in the world and we are confident this will safeguard consumer interest, promote fair competition and ensure that the airport operators continue to enhance their service levels,” MAVCOM added.
It pointed out that the new ASEAN PSC tier will also enhance intra- regional connectivity and result in benefits around trade, investment, tourism and development.
Meanwhile, competition is intensifying in the local aviation sector this year, with more airlines adopting a more aggressive pricing strategy to improve their load factor.
AirAsia, for example, had benefitted over the last year from the restructuring of Malaysia Airlines and favourable market conditions such as low jet fuel prices.
The low cost carrier continued to gain market share in 2016, at the expense of Malaysia Airlines’ restructuring, with passenger traffic rising 13 per cent to 13 million in the first half of 2016.
Malaysia Airlines, on the other hand, reported a 24 per cent lower passenger traffic for the first quarter of 2016.
However, the Centre for Aviation (CAPA) said AirAsia will likely need more aircraft to respond to new competitive threats and maintain its market share now that the national carrier was starting to emerge as a tougher competitor under the leadership of its new Chief Executive Officer Peter Bellew.
Aside from this, Malindo Air was accelerating its expansion exercise targetted at several of AirAsia’s most lucrative routes.
Malaysia Airlines was said to be planning to resume capacity expansion over the next year with the focus on China and India - markets which AirAsia was also targeting.
As a result of the national carrier’s massive restructuring programme, its international network was cut by nine destinations since the second quarter of 2015.
Meantime, Malindo Air had been aggressively accelerating international expansion with 11 new international destinations launched over the year, seven of which were similarly served by AirAsia.
The airline was on track to carry six million passengers in 2016, including four million passengers at KLIA.
On the global outlook, the International Air Transport Association (IATA) expects the airline industry to record lower net profit of US$29.8 billion next year, as market conditions were anticipated to be more difficult with rising oil prices.
For 2016, IATA expects the global industry to record a net profit of US$35.6 billion.
IATA said oil price averaged at US$44.6 per barrel in 2016 and it would likely increase to US$55 per barrel in 2017, thus pushing jet fuel prices from US$52.1 per barrel in 2016 to US$64.9 per barrel next year.
Despite the intense competition and bearish market conditions, Malaysia remained an attractive market for foreign airlines.
British Airways, the national flag carrier of the United Kingdom, recommenced its London-Kuala Lumpur service about 18 months ago, after suspending the route in 2001.
Speaking to Bernama, Head of Asia-Pacific Sales Robert Williams said Malaysia continued to be a strong and important market for British Airways and the airline had demonstrated its commitment to this market by continuously introducing new products and services.
“Last December, we upgraded the aircraft serving this sector to the Boeing 787-9 Dreamliner, the most technological advanced aircraft in our fleet, so that our customers can enjoy the best possible experience and service.
“We also reaff irmed our commitment with the introduction of the ‘ On Business’ loyalty programme, which aims at enabling businesses, particularly small and medium enterprises, to maximise their travel budget,” he added. — Bernama
Equalisation of the PSC at KLIA and klia2 is important for the industry to create a level playing field for all airline carriers operating at both terminals. MAVCOM